Regulators Announce Closure of NY’s Signature Bank, Which Held Significant Crypto Stakes

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U.S. regulators on Sunday announced they were closing Signature Bank, marking the second U.S. bank to fail days apart and the third-largest bank failure in U.S. history.

According to a December 2022 securities filing, N.Y.-based Signature Bank held more than $110 billion in assets and some of the biggest stakes among banks in the nation in the cryptocurrency industry.

The bank said at the time that it would be shrinking its $17.79 billion in crypto-related deposits by $8 billion to reduce risk in “a challenging cryptocurrency environment.”

The bank had client offices in New York, Connecticut, California, Nevada, and North Carolina, and had eight business lines beyond digital asset banking, including commercial real estate.

New York Gov. Kathy Hochul said on Sunday that the closure decision, made alongside the state chartering authority and federal partners over the weekend, was to “stabilize the banking sector and protect the hard-earned money of New Yorkers whose livelihoods depend on impacted companies.”

“I’m grateful that the Federal regulators have taken steps to do just that, and I hope that these actions will provide increased confidence in the stability of our banking system. Many depositors at these banks are small businesses, including those driving the innovation economy, and their success is key to New York’s robust economy.”

SVB Fail

Following the failure of the tech-focused Silicon Valley Bank (SVB) in Santa Clara, California, on March 10, stock prices plunged at other banks that cater to technology companies, including First Republic Bank and PacWest Bank. SVB’s closure was the second-largest bank failure in U.S. history at $209 billion, following Washington Mutual’s collapse in the 2008 crisis.

U.S Treasurer Janet Yellen pointed to rising interest rates, which have been increased by the Federal Reserve to combat inflation, as the core problem for Silicon Valley Bank. Many of SVB’s assets, such as bonds or mortgage-backed securities, lost value with each rate increase. At the same time, the bank’s startup clients were increasingly drawing down on funds amid a sparsity of venture capital investments.

Regulators have stepped in to guarantee customer deposits, both insured and uninsured, in SVB and Signature Bank, seeking to reassure the public and prevent wider bank runs in tech-exposed institutions.

In a joint statement with the U.S. Treasury Department and Federal Reserve, the Fed’s emergency lending authority—the Federal Deposit Insurance Corporation (FDIC)—said that it is “announcing a similar systemic risk exception for Signature Bank” as SVB was granted.

“All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,” read a joint statement from the federal regulators.

“Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law,” the statement continued.

“These actions will reduce stress across the financial system, support financial stability and minimize any impact on businesses, households, taxpayers, and the broader economy,” the Fed said of its emergency management approach.

The Associated Press contributed to this report.

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